Dynamic modeling of mean-reverting spreads for statistical arbitrage

Statistical arbitrage strategies, such as pairs trading and its generalizations, rely on the construction of mean-reverting spreads enjoying a certain degree of predictability. Gaussian linear state-space processes have recently been proposed as a model for such spreads under the assumption that the observed process is a noisy realization of some hidden states. Real-time estimation of the unobserved spread process can reveal temporary market inefficiencies which can then be exploited to generate excess returns. Building on previous work, we embrace the state-space framework for modeling spread processes and extend this methodology along three different directions. First, we introduce time-dependency in the model parameters, which allows for quick adaptation to changes in the data generating process. Second, we provide an on-line estimation algorithm that can be constantly run in real-time. Being computationally fast, the algorithm is particularly suitable for building aggressive trading strategies based on high-frequency data and may be used as a monitoring device for mean-reversion. Finally, our framework naturally provides informative uncertainty measures of all the estimated parameters. Experimental results based on Monte Carlo simulations and historical equity data are discussed, including a co-integration relationship involving two exchange-traded funds.Comment: 34 pages, 6 figures. Submitte

Computer-based intrapartum fetal monitoring and beyond: A review of the 2nd Workshop on Signal Processing and Monitoring in Labor (October 2017, Oxford, UK).

The second Signal Processing and Monitoring in Labor workshop gathered researchers who utilize promising new research strategies and initiatives to tackle the challenges of intrapartum fetal monitoring. The workshop included a series of lectures and discussions focusing on: new algorithms and techniques for cardiotocogoraphy (CTG) and electrocardiogram acquisition and analyses; the results of a CTG evaluation challenge comparing state-of-the-art computerized methods and visual interpretation for the detection of arterial cord pH <7.05 at birth; the lack of consensus about the role of intrapartum acidemia in the etiology of fetal brain injury; the differences between methods for CTG analysis "mimicking" expert clinicians and those derived from "data-driven" analyses; a critical review of the results from two randomized controlled trials testing the former in clinical practice; and relevant insights from modern physiology-based studies. We concluded that the automated algorithms performed comparably to each other and to clinical assessment of the CTG. However, the sensitivity and specificity urgently need to be improved (both computerized and visual assessment). Data-driven CTG evaluation requires further work with large multicenter datasets based on well-defined labor outcomes. And before first tests in the clinic, there are important lessons to be learnt from clinical trials that tested automated algorithms mimicking expert CTG interpretation. In addition, transabdominal fetal electrocardiogram monitoring provides reliable CTG traces and variability estimates; and fetal electrocardiogram waveform analysis is subject to promising new research. There is a clear need for close collaboration between computing and clinical experts. We believe that progress will be possible with multidisciplinary collaborative research

A Robust Approach for Clock Offset Estimation in Wireless Sensor Networks

The maximum likelihood estimators (MLEs) for the clock phase offset assuming a two-way message exchange mechanism between the nodes of a wireless sensor network were recently derived assuming Gaussian and exponential network delays. However, the MLE performs poorly in the presence of non-Gaussian or nonexponential network delay distributions. Currently, there is a need to develop clock synchronization algorithms that are robust to the distribution of network delays. This paper proposes a clock offset estimator based on the composite particle filter (CPF) to cope with the possible asymmetries and non-Gaussianity of the network delay distributions. Also, a variant of the CPF approach based on the bootstrap sampling (BS) is shown to exhibit good performance in the presence of reduced number of observations. Computer simulations illustrate that the basic CPF and its BS-based variant present superior performance than MLE under general random network delay distributions such as asymmetric Gaussian, exponential, Gamma, Weibull as well as various mixtures

Indoor Positioning Using Nonparametric Belief Propagation Based on Spanning Trees

Nonparametric belief propagation (NBP) is one of the best-known methods for cooperative localization in sensor networks. It is capable of providing information about location estimation with appropriate uncertainty and to accommodate non-Gaussian distance measurement errors. However, the accuracy of NBP is questionable in loopy networks. Therefore, in this paper, we propose a novel approach, NBP based on spanning trees (NBP-ST) created by breadth first search (BFS) method. In addition, we propose a reliable indoor model based on obtained measurements in our lab. According to our simulation results, NBP-ST performs better than NBP in terms of accuracy and communication cost in the networks with high connectivity (i.e., highly loopy networks). Furthermore, the computational and communication costs are nearly constant with respect to the transmission radius. However, the drawbacks of proposed method are a little bit higher computational cost and poor performance in low-connected networks